Frugal Living is back with Season 5! In the first episode, Jim speaks with a financial advisor about investing in uncertain times. Check out Frugal Living on Apple Podcasts, Spotify, Google Podcasts, Amazon, Anchor.fm, iHeartRadio, or anywhere you go to find podcasts.
Inflation remains the key word of the year. But what does that mean for everyday investors? Jim answers this question with advice from an expert. He talked with Andy Wang, a financial advisor at Runnymede Capital Management and host of the popular financial podcast, Inspired Money.
How do you invest during uncertain times?
According to Andy, the answer revolves around limiting risk. Consider your investment strategy. Don’t panic. Once you’ve made a plan, stick to it. That even applies during catastrophic events. While we might be too young to remember similar market conditions, none of this is unprecedented.
To hear the full interview, listen on Apple Podcasts or Spotify. Or, read the full transcript below. Looking for discounts on insurance and financial services? We’ve got deals for that.
Read a Transcript From This Episode
Jim (00:02):
This is Frugal Living. <music> If 2022 had one unifying financial theme, that theme might be inflation. I’ve been wondering recently what kind of information do you need to know when you wanna think about investing during uncertain times. That’s why I found Andy Wang. He’s a financial advisor and the host of Inspired Money. Our conversation centers around investing in turbulent times. How do you invest for inflation? I wanted to find someone who knows a lot more than me to talk about it. I loved this conversation and I hope you do too. Here’s me and Andy Wang.
Andy (00:55):
I’m Andy Wang. I’m a financial advisor at Runnymede Capital and host of the Inspired Money podcast.
Jim (01:01):
This year is pretty strange in terms of the markets. Inflation was already something we had to consider. And now it seems to skyrocket with an invasion in Europe. And I was hoping you could shed some light onto what we need to be thinking about as investors during this time.
Andy (01:20):
I think that there are no easy answers, like, in my career. And I’ve been doing this for over 20 years. I’ve been fortunate to, you know, be living and working in an environment of relatively low inflation and haven’t had to deal with that. You know, meanwhile, there have been countries in South America–specifically, I guess examples would be Venezuela or Argentina–that over the years, citizens have had to deal with that. I mean, you get your paycheck and you’re trying to exchange that for US dollars or you’re trying to buy your groceries or gas as soon as possible because if you wait a few days, your money is worth less. As an American here in New Jersey, you know, we have been trying to talk to investors who are older than us. I turned 50 years old yesterday. I feel like, “Okay, I’m not a young guy.” And my kids keep reminding me that. But you know, I’ve been talking to my dad who founded Runnymede Capital. My brother and I now run this fee-only financial advisory firm. And talking to my dad, talking to some of his counterparts who have been investors longer than us, specifically through the 1970s. You know, we’re trying to ask them if we’re in a period of sustained inflation, what does one do? And I don’t know that they have clear answers for us other than when they look back at history, they say, “Well, I really remember that period.” Many of, like, my dad’s generation, that’s when they were starting their careers. It was, like, late sixties, early seventies. In the 1970s, you were having a bear market every couple years to the point where the mutual fund industry almost disappeared because there was so little interest in owning stocks that the industry almost dried up. And looking back, it’s kind of funny. We joke because, like, Bank of New York today is so well-known as a custodian and processor of a lot of the things that go on behind the scenes for funds. And the joke is that they just had done it and they never stopped. The cycle was such that many service providers disappeared. And then the Bank of New York was still there. I think the bank is very proud of that given their long history. I mean, one of the oldest banks in America founded by Alexander Hamilton. And it was really a frugal approach to running their business that they’re proud of. It allowed them to survive the Depression and to last over many, many market cycles. And of course, you know, things change. But I have a little glimpse into that history because my dad worked at the Bank of New York for 20 plus years. He was director of research. He ran the research department in the 70s and then in the 1980s, he managed their pension fund as well as outside clients. He was president of the bank’s money management subsidiary, Beacon Capital Management before founding his own company. So since your show is about frugality, like, there are organizations that are proud of their frugality. When my dad started his career there, he laughs looking back saying that, you know, there were, like, holes in the carpet. They needed to replace things and they didn’t, and we’re proud of it. They’re like, “This is why we survived through the Depression.” And they had rotary phones for the longest time. They didn’t even have touch-tone dialing and the employees would laugh. They’re like, “Oh my gosh, it takes us so long just to make phone calls because we have to wait.” Not until Irving Bank combined with the Bank of New York, that’s how they got their touch-tone phone technology. So there’s some pluses to frugality. Like, when you’re watching how much you’re spending, the lesson, I guess, is living within your means gives you tremendous flexibility because longevity’s on your side. Like, you’re not worrying about running out of funds and running into problems. I guess I didn’t answer your question. Looking back at inflation, I think that one does have to consider, like, what does your portfolio look like? And maybe you do need to own some commodities. Maybe you need to own oil. Maybe you need to own gold. And there are always gold bugs. And in my career, I’ve met many people–guys who are now in their seventies and eighties. They still love oil. They love energy. They know it well, they study it a lot. But, you know, throughout history it’s, like, it’s always cyclical. So it’s very challenging to try to forecast, like, where our oil price is going. It’s kind of a fluke that you have a war, like Russian invasion of Ukraine. It’s like lighting a fire. And the volatility is pretty crazy. I mean, having to live and invest in a world where you don’t always know what the future’s gonna be, I guess it goes back to the very conventional wisdom of the importance of being diversified and not having all your eggs in one basket. But I guess spreading your investments such that even if there are unforeseen scenarios that you can be okay.
Jim (06:29):
There’s a lot to think about in that response. We hear often time in the market beats timing the market. And that ties pretty well into what you’re saying with your dad’s business. They survived because they kept their nose down. They kept working and they didn’t spend extravagantly. You talk about the importance of frugality and you talk about diversifying investments. The one thing that hurts a little bit to hear as, like, a, not a young investor by any means. I’m 36. The entirety of my adult life, like, I thought, “Hey, we, we went through it in 2008. I’ve seen a recession. I’ve seen some tough times in the market, but I’ve never seen anything like this.” It’s a little bit reassuring to hear you say, you know, you haven’t either. You gotta ask others with more experience than you. But the entirety of the advice that I’ve gotten that’s really worked for the entirety of my investing career has been, you know, broad market ETFs. Just, you know, don’t try to guess. Like, you don’t have enough time to research the companies you need to research. You have another job. Just invest in the market. That’s painful right now. That’s a painful spot to be in. If we wanna start looking into commodities, where do you start?
Andy (07:40):
Well, I think that if you are a, like, passive indexed investor owning the S&P 500, you still have some exposure to energy. And I don’t have the figures off the top of my head, but it’s, like, the percentage of the S&P that is technology, like, that has changed a lot over the last 20 years. Even energy, I’m sure that represents a lot less of the S&P than it did years ago. But there’s energy in there. You’re gonna own Exxon. You’re gonna own some of the premier names in energy. So you’re kind of covered that way. I think it’s like, “Do you need more than that?” And every investor has to look at, you know, what is your investment approach? Because one thing that I love about investing is that there’s not one right or wrong way to do it. You’ve seen throughout history so many different investors succeed with many, many different approaches. Some are short-term oriented, some are long-term oriented. Some are very specific. Like, I’ve met guys, all they do is invest in banking stocks. Like, they know the banking sector and they feel like they have a leg up on understanding what the economic cycle is. Are we in a recession? Are we coming out of a recession? Will banks be benefiting where interest rates going? So there are many ways of doing it. I think that in owning the S&P 500 and just sticking to that, that is a methodology. And part of that methodology is that you have to resist, like, the emotional fear and pain of difficult times. And we’ve had a really long stretch, right? It’s been since 2009. We’ve had some disruptions in there, but not as severe as 2008 or back in 2000 when we had the internet bubble burst. So I would say that it’s been this very long bull market. And people have seen that in their 401k accounts growing, their personal investment accounts growing. So I think that that still works. I think there are some concerns in 2022. Namely, it’s this inflation. And there’s a lot of discussion about the Federal Reserve and other central banks globally. So the European Central Bank, Bank of Japan really being, like, the big three. There are others, of course. But looking at the three, they’ve been able to maintain this low interest rate policy in the face of a pandemic, in the face of the financial crisis, just to keep, sort of, the economic engine going and to keep financial markets supported. What if this inflation that we’re seeing continues, right? Especially when you have a war that is adding to this. Like, I got gas last Sunday. My wife went in the morning to Costco and paid like 3.56 I think. I went at 6pm. It had already gone up 20 cents. And that was at Costco, which is 20 to 30 cents lower than everywhere else. So, like, we’re seeing this drastic, noticeable increase in fuel cost that impacts us. I mean, it’s actually impacting our decisions. When I think about, “Oh, should I go drive over to my parents to get something?” I’m gonna wait until I’m closer and have another errand to run over there. I’m not gonna go just to go there because it might cost me five bucks. <music>
Jim (11:14):
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More About Frugal Living with Jim Markus
To hear more episodes about tips for living a frugal lifestyle, check out all four seasons of Frugal Living. Frugal Living is a podcast for smart consumers. How do you spend less and get more? The show, sponsored by Brad’s Deals, features interviews, stories, tips, and tricks. Jim Markus hosts season five, out now.
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